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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The imbalance between limited productive resources and unlimited human wants






2. The sum of consumer surplus and producer surplus






3. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






4. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






5. Ei = (%dQd good X)/(%d Income)






6. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






7. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






8. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






9. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






10. The change in quantity demanded resulting from a change in the price of one good relative to other goods






11. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






12. ATC = TC/Q = AFC + AVC






13. Exists at the point where the quantity supplied equals the quantity demanded






14. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






15. Total product divided by labor employed. APL = TPL/L






16. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






17. Product demand - productivity - prices of other resources - and complementary resources






18. AVC = TVC/Q






19. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






20. The additional cost incurred from the consumption of the next unit of a good or a service






21. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






22. A good for which higher income decreases demand






23. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






24. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






25. Demand for a resource like labor is derived from the demand for the goods produced by the resource






26. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






27. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






28. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






30. The lost net benefit to society caused by a movement away from the competitive market equilibrium






31. A firm that has market power in the factor market (a wage-setter)






32. Models where firms are competitive rivals seeking to gain at the expense of their rivals






33. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






34. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






35. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






36. Ed = 1






37. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






38. Es = (%dQs) / (%dPrice)






39. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






40. The most desirable alternative given up as the result of a decision






41. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






42. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






43. Exists if a producer can produce more of a good than all other producers






44. The price of a good measured in units of currency






45. The practice of selling essentially the same good to different groups of consumers at different prices






46. The marginal utility from consumption of more and more of that item falls over time






47. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






48. The ability to set the price above the perfectly competitive level






49. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






50. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.